NSW Coal Compensation Board v Nardell Colliery P/L

LOWER COURT Supreme Court - Common Law Division JURISDICTION : LOWER COURT 1999/11 FILE NUMBER(S) : LOWER COURT Sperling J JUDICIAL OFFICER :

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40518 of 2003

MEAGHER JA SHELLER JA HODGSON JA

Tuesday, 2 March 2004 NEW SOUTH WALES COAL COMPENSATION BOARD v THE NARDELL COLLIERY PTY LIMITED & NSW COAL COMPENSATION REVIEW TRIBUNAL

FACTS The facts considered in this appeal are set out in the first thirteen (13) paragraphs of Hodgson JA's judgment.

DECISION

1. Appeal allowed, in part, quashing the part of the NSW Coal Compensation Review Tribunal's decision which determined the quantification of factors referred to as "r" and "e";
2. The parties to submit to the Court, within fourteen (14) days, either: (i) agreed orders; or, alternately, (ii) alternative versions with supporting written submissions, to give quantitative effect to the " r " and " e " factors in accordance with the findings of this judgment;
3. Appeal dismissed otherwise;
4. First respondent to pay the appellant's costs of instituting the appeal and preparing the appeal books, and further each party to pay its own costs apart from this aspect of the appellant's preparations.

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40518 of 2003

MEAGHER JA SHELLER JA HODGSON JA

Tuesday, 2 March 2004 NEW SOUTH WALES COAL COMPENSATION BOARD v THE NARDELL COLLIERY PTY LIMITED & NSW COAL COMPENSATION REVIEW TRIBUNAL

Judgment 1 MEAGHER JA: This case, an appeal from Sperling J, concerns the quantification of compensation payable by the Crown to the first respondent (Nardell). Before 1 January 1982 Nardell held an estate in fee simple in certain coal at Rix's Creek near Singleton NSW. It did not own the corresponding surface rights. As such coal owner, Nardell was entitled to receive from the Crown (a) seven-eighths of any royalty paid to it by the miner of the coal (s. 76 (2) of the Coal Mining Act 1973 ("CMA")), and (b) any front end payment paid to it by the miners of the coal (s. 128(4) of the CMA 1973). 2 By virtue of s. 5 of the Coal Acquisition Act 1981 ("CAA") Nardell's coal was confiscated and vested in the Crown. 3 Section 6(1) of the CAA 1981 authorised the Governor to formulate compensation rules for dispossessed coal owners. It did so, in a document called the "1985 Arrangements". The appellant Board and the respondent Tribunal were established under the 1985 Arrangements. 4 Clause 9 (2) of the 1985 Arrangements provided: (2) Where a person claims to have sustained pecuniary loss which is directly attributable to the discharge of any trust, lease, licence, obligation, estate, interest or contract by virtue of the operation of section 5 of the Coal Acquisition Act 1981, and the loss is not one in respect of which a claim could be made under clause 10 or 11, the person is eligible to make a claim under clause 12.

The parties are agreed that Nardell's case was covered by clause 9(2), and hence by clause 12. It accordingly became entitled to claim compensation for the pecuniary losses it suffered when its coal was confiscated on 1 January 1982. 5 On 20 October 1989, a lease over certain coal, which included Nardell's coal, was granted by the Crown to a third party, Bloomfield Collieries Pty Limited. Under this lease, Bloomfield was obliged to pay to the Crown a front-end payment of $121,788.00, the prescribed royalty on extracted coal and super royalty agreed at $0.50 per tonne of coal won by open cut, subject to variation in the rate at the Minister's discretion. 6 In 1992 the old Coal Mining Act 1973 was repealed and replaced by the Mining Act 1992. This change made no relevant difference in relation to the royalty stream from the Nardell Coal confiscated in 1982. The prescribed royalty and a super royalty continued to be payable by the coal miner to the Crown. The coal now became public rather than private, but that made no difference. 7 Nardell, made a claim for compensation under the 1985 Arrangement. The compensation was apparently determined, but no payments were made because of a capping clause pursuant to s. 6(3) of the CAA 1981, which limited the compensation payable to companies in the one Group. (Another company in the same group had exhausted the compensation available to the group). 8 With the advent of a new Government, a decision was made to reverse the confiscation legislation. This was effected by the Coal Ownership (Restitution) Act 1990 (the CORA 1990). It provided that some dispossessed owners could apply for restoration. This, in turn, was amended so as to permit a re-acquisition of coal which had been restored to its owner together with a power to refuse restoration. This was effected by the Coal Acquisition (Amendment) Act 1997 (the CAAA 1997). There was also a trade-off for this change of policy by introducing a more generous compensation scheme, known as the 1997 Arrangements. 9 It is of importance to note the exact words of s. 6(7) of the CAAA. They are: 6(7) The amount of compensation payable under arrangements under this section must be just and equitable in so far as the compensation: (a) results from the operation of section 5A, or (b) relates to a refusal by the Minister to grant coal to an eligible applicant, after the commencement of this subsection, under the Coal Ownership (Restitution) Act 1990. For the purpose of giving effect to paragraph (b) any existing determination of the compensation concerned is to be re-determined in accordance with this subsection. 10 On 12 December 1997 Nardell applied for restoration of its coal, and in November 1998 that application was refused. On 26 November 1998 it applied for compensation under the 1997 arrangements. Clause 10(1) of the 1997 Arrangements provides as follows: 10(1) When an eligible claimant under the Restitution Act [the CORA 1990] has the person's application under that Act refused on the ground specified in section 7 (1A) (b) of that Act (namely, that the Minister is of the opinion that the Crown would lose significant revenue were the coal concerned to cease to be vested in the Crown), the original compensation claim (that is, the claim for compensation under the 1985 Arrangements by reason of which the person was such an eligible claimant) is on application to be redetermined under this Order. [Emphasis in the instrument.] (2) For the purposes of the redetermination, the compensation payable is to be calculated in accordance with Schedule 1. The amount of compensation as redetermined is not to be less than the amount determined under the 1985 Arrangements in respect of the original compensation claim. 11 The effect of this was, as his Honour observed: "The original compensation claim refused to in clause 10(1), now to be redetermined, was, in terms of the 1985 Arrangements, a claim for compensation for the 1982 Acquisition." 12 The claim was made to, and adjudicated on by, the respondent Board. It assessed compensation for the period 1988 to 2027 at a total of $2,484,335.00. From that it deducted the sum of $564,401.00 which is the amount of interim payments made to Nardell. 13 The assessment of compensation to be applied by the Board is based on a discounted cash flow approach. The method is as follows: 14 One first calculates the "total base compensation amount". That is to be done by adding up the compensation calculated for each period of one year before and after the date of determination, as from a date described as "the base date", which is defined as 1 January 1982, being the date of the original seizure of the coal. A formula is provided for past periods: r x t x a. r is "0.90 or such other amount as the Board considers just and equitable in the circumstances of the case". t is the quantity of coal in tonnes that "in the Board's opinion has been or will be extracted" in each year, past and future. a is a factor for interest on past losses. A further formula is provided for future periods: r x t x e/1000. e/1000 is a factor for discounting future losses for present value and for risk. The figures so determined for each period of the year are added together to obtain "a total base compensation amount for the application". 15 The figure of $0.90 for r was calculated as follows: in the original 1985 Arrangements it was $0.50, but was amended to $0.90 in 1990. Arithmetically, that figure was the value of seven-eighths of the prescribed royalty of $1.70 per tonne after tax at the 1990 company tax rate of 39%. By November 1997, when the 1997 Arrangements were made, the company tax rate was, in fact, 36% and the up-to-date figure would have been $0.95 not $0.70. 16 The Board issued its final assessment report on 23 September 1997. It related to each year from and including 1996 (presumably because that was the first year coal was extracted) up to and including 2027 (which apparently was the estimated life of the mine). 17 In calculating its figures the Board used $0.90 for factor r (despite its apparent inappropriateness), and said that it had done so because "no private agreement was operating between the claimant and any other party", an observation which nobody has either espoused or understood. 18 It also used a rate of 15.5 per cent for future income for factor e. This was composed of a base rate of 9.5 per cent plus a margin of 6 per cent for the business risk associated with extraction of the deposit of which Nardell's coal was part. 19 The Board allowed no loss in relation to super-royalty or front-end payment. 20 On 16 December 1999 Nardell appealed to the Tribunal. The Tribunal was empowered to allow an appeal, to dismiss an appeal, to vary the Board's determination, or to remit the claim to the Board for reassessment. The Tribunal gave its decision on 17 April 2002. As the Board had done, it allowed nothing in relation to super-royalty or front-end payment. However it held that the claim should be remitted to the Board for redetermination of the r factor having regard to movement in the company tax rate. (By 1999, the rate had been reduced to 30 per cent.) 21 Nardell then commenced the present proceedings in the Supreme Court of New South Wales, which were heard by Sperling J, and from which the present appeal is brought. It was claiming prerogative relief. It challenged the Tribunal's failure to bring to account Nardell's asserted loss in relation to super-royalty and front-end payment. Secondly, it challenged the correctness of the directions given by the Tribunal to the Board as to how the r factor should be recalculated. 22 On the former point, Sperling J upheld Nardell's contention In my view, despite the arguments of the Board before us, I think Sperling J was perfectly correct. The Tribunal had made a mistake of law in failing to bring the super-royalty and the front-end payment into account. I am perfectly content to adopt Sperling J's reasoning on this issue as my own. The absence of payment of either super-royalty or front-end payment to Nardell is causally linked, and the direct result of, the Crown's confiscation of Nardell's coal in 1982. The basis of the argument to the contrary - and it seems to have been an agreement which met with the acceptance of both Board and Tribunal - was that what Nardell was being compensated for was the Board's refusal of its application for restoration of its coal in November 1998, not the loss of its coal. But this is to misread the 1997 legislation - both the CAAA and the 1997 Arrangements. The legislative language uses the expression "redetermination", not the expression "determination"; it states, in effect, that what is to be redetermined in the original claim for compensation and the 1995 Arrangements, already adversely determined; and it identifies the base date at 1 January 1982 (i.e. a date before any claim for restoration was made, much less refused). That I regard as fairly clear. 23 The second submission argued by Nardell is not so clear, and is, I think, negated by the submissions of the Board which are critical of Sperling J in this regard. Simplifying the problem slightly, the position is this: in order to arrive at the final figure for compensation, one must determine both an r figure and an e figure. The r figure, which the Board had habitually used, was $0.90, that figure being arrived at by taking the value of seven-eighths of the prescribed royalty of $1.70 per tonne after tax (at the 1990 company rate). As far as e (the discount rate) is concerned, there was a more complicated formula. One determines a base rate, and then adds a factor of 6% for market risk. As far as the base rate is concerned, one determines a premium of the weighted average of the cost of capital (WACC), which in the present case was 8.25%, only part of which (3.23%) was added to the bond rate to calculate the base rate. So, according to the Board, one had an e factor of 15.5% - consisting of the long-term bond rate (6.63%), part of a premium (3.23%) and a market risk factor of 6%. 24 Nardell's submissions before Sperling J (but not, apparently, before either the Board or the Tribunal) is that dividend imputation was to be taken into account in ascertaining both r and e. It is clear enough that the Tribunal did take it into account in determining e, but not in determining r. This, it was said, was inconsistent, and an inconsistency of such high order as to constitute an error of law. I must say that, initially, I found it difficult to see any inconsistency. I could see why dividend imputation should have been taken into account in the case of e, but I could not understand why it was a factor of any relevance at all in the case of r. Indeed, a submission to that effect was made by the Board in its written submissions, but abandoned in oral argument. I was eventually persuaded that dividend imputation was a relevant factor to take into account in fixing on the value of r. This was the view of the experts on both sides, and of the trial judge; and it was also, as I have said, the ultimate view of both the appellant and the respondent. 25 Sperling J, having perceived the inconsistency, in effect approved of the figure calculated for e, and instructed the Board to recalculate the figure for r on a consistent basis. But this he could not do in exercise of his administrative jurisdiction. He was entitled (indeed, bound) to discern an error of law once the inconsistency emerged, but he could not then descend into the merits of the dispute. Granted inconsistency, either r was right but not e, or e was right but not r, or both were wrong. Which conclusion one should arrive at is the prerogative of the Board, not the Court. 26 SHELLER JA: I agree with Hodgson JA. 27 HODGSON JA: On 29 May 2003, in proceedings brought by the first respondent (Nardell) against the second respondent NSW Coal Compensation Review Tribunal (the Tribunal) and the appellant (the Board), Sperling J made the following order: 2. An order under section 69 of the Supreme Court Act 1970 that: (a) the direction of the first defendant in respect of variable 'r' in paragraph 3 on page 30 of its Decision dated 17 April 2002 in CCRT No. 1999/11 in the matter of an appeal by the plaintiff against a determination of the second defendant (the CCRT Appeal) and the direction of the first defendant that no orders be made in respect of front-end payments and super royalty in paragraph 4 on page 30 of that Decision be quashed; (b) the first defendant re-determine afresh its determination in respect of variable 'r' in the CCRT Appeal (including super royalty) according to law in conformity with this Court's decision concerning the way in which variable 'r' should be determined in the circumstances of the present case; (c) the first defendant re-determine afresh its determination in respect of front-end payments according to law in conformity with this Court's decision concerning the way in which front-end payments should be dealt with in the circumstances of the present case. 28 The first defendant was the Tribunal, and the second defendant was the Board. The Board appeals to this Court from that order.

CIRCUMSTANCES 29 Prior to 1 January 1982, Nardell owned certain coal at Rix's Creek near Singleton, New South Wales. On 1 January 1982, such coal vested in the Crown pursuant to s.5 of the Coal Acquisition Act 1981 (CAA). 30 Section 6(1) of the CAA authorised the Governor to make arrangements for the determination of cases in which compensation was to be payable for such appropriations, and of the amount and method of payment of any such compensation. The Governor did so, by setting up what has been called the 1985 Arrangements. The Board and the Tribunal were established in the 1985 Arrangements. 31 On 20 October 1989, a lease over certain coal, which included the coal appropriated from Nardell, was granted by the Crown to Bloomfield Collieries Pty. Limited (Bloomfield). Under this lease, Bloomfield was obliged to pay the Crown a "front-end" payment of $121,788.00, royalty on coal won at the rate prescribed pursuant to s.77(1)(b) of the Coal Mining Act 1973 (CMA), and a "super-royalty" agreed to pursuant to s.77(1)(a) of the CMA of fifty cents per tonne on coal won by open cut (subject to variation at the Minister's discretion). 32 In 1990, the Coal Ownership (Restitution) Act 1990 (CORA) was passed, which provided that some dispossessed owners of coal could apply for restoration to them of ownership of their coal. There was consequential amendments to the CMA 1973, which I will refer to later. 33 In 1992, the CMA 1973 was repealed, and replaced by the Mining Act 1992 (MA). This did not affect the lease to Bloomfield, although it contained provisions as to royalty of some relevance to this case, which I will set out later. 34 Nardell made a claim for compensation under the 1985 Arrangements. On 24 June 1997, this claim was determined at nil, because compensation payable to another company in the same group as Nardell brought into play a capping provision in the 1985 Arrangements. 35 In 1997, the Coal Acquisition Amendment Act 1997 (CAAA) amended both the CAA 1981 and the CORA 1990, so as to permit re-acquisition by the Crown of coal that had been restored to its owner under the CORA 1990, and also introducing a more generous compensation scheme, which became known as the "1997 Arrangements". 36 On 12 December 1997, Nardell applied for restoration of its previously owned coal. This application was refused in 1998; and on 26 November 1998 Nardell applied for compensation under the 1997 Arrangements. 37 This claim was made to and adjudicated by the Board. The Board assessed compensation at $2,484,335.00, from which it deducted $564,401.00, being the amount of interim payments made to Nardell. The compensation figure was based on a notional royalty figure (represented by a factor r in the calculation) of ninety cents per tonne. The Board allowed nothing in respect of the front-end payment and super-royalty paid to the Crown by Bloomfield. 38 Nardell appealed from this determination to the Tribunal on 16 December 1999, and the Tribunal gave its decision on 17 April 2002. The Tribunal held that the claim should be remitted to the Board to re-determine the notional royalty figure, because of changes in the company tax rate. However, it too held that there should be no compensation based on the front-end payment or super-royalty. 39 Nardell then brought proceedings in the Supreme Court, seeking relief in the nature of certiorari in relation to two matters: first, the Tribunal's failure to provide for compensation in relation to the front-end payment and super-royalty; and second, the direction given by the Tribunal concerning re-calculation of the royalty factor. Before Sperling J, Nardell succeeded on both points.

GROUNDS ON APPEAL 40 The Board appeals on the following grounds: 1. His Honour erred in holding that the second respondent ("the Tribunal") was bound to find that it was "just and equitable" that the first respondent ("Nardell") receive compensation for the loss of its entitlement to a share of the front-end payment received by the Crown in relation to the Bloomfield Collieries Lease. 2. His Honour erred in holding that the Tribunal was bound to find that it was "just ands equitable" that Nardell receive compensation for the loss of its entitlement to a share of the super royalty received by the Crown in relation to the Bloomfield Collieries Lease: (a) on and from the commencement of the Bloomfield Collieries Lease; off" (b) alternatively, on and from the commencement of the Mining Act 1992. 3. Having found a mismatch between the methodology used by the Tribunal to determine the base rate component of factor "e" and the methodology used by the Tribunal to determine factor "r", his Honour erred in failing to frame the relief granted so as to permit the Tribunal, in its discretion, to reconsider the methodology used to determine factor "e" as well as or in the alternative to reconsidering the methodology used to determine factor "r". 41 Nardell has put on a Notice of Contention, relying on the following grounds: 1. The decision of the Second Respondent to exclude compensation for the loss of the First Respondent's entitlement to a share of the front-end payment received by the Crown in relation to the Bloomfield Collieries Lease involved jurisdictional error or alternatively error of law on the face of the record. 2. The decision of the Second Respondent to exclude compensation for the loss of the First Respondent's entitlement to a share of the super royalty received by the Crown in relation to the Bloomfield Collieries Lease involved jurisdictional error, or alternatively error of law on the face of the record. 3. The failure of the Second Respondent to take into account in determining just and equitable compensation the fact that the Crown has received the front end payment and has received and will continue to received super royalty in relation to the Bloomfield Collieries Lease involved jurisdictional error, or alternatively error of law on the face of the record or Wednesbury unreasonableness. 42 After setting out the relevant statutory provisions, I will consider the issues raised under two headings, first the matter of super-royalty and up-front payment, and second the determination of r.

STATUTORY PROVISIONS 43 In order to understand the issues in this case, it is necessary to have regard to provisions of various statutes and instruments. 44 First, the CMA 1973 contained the following provisions concerning royalty in s.76, 77 and 128: 76(1) The registered holder of a coal lease shall pay royalty on coal, and on any mineral to which a coal lease applies by reason of a direction given under section 72(3)(a), won from the mining area. (2) If royalty is paid, or recovered under section 82(2), in respect of coal or a mineral not owned by, or reserved to, the Crown, the Minister shall pay to the owner of the coal or the mineral the amount of the royalty (and any interest thereon paid pursuant to section 81), less an amount equal to one-eighth of the amount of the royalty which shall be paid into the Consolidated Revenue Fund.

77(1) Subject to subsection (13), royalty is payable by the registered holder of a coal lease on coal won from land subject to the lease- (a) at such rate (if any) additional to the rate prescribed for the purposes of paragraph (b) as the registered holder agreed to pay pursuant to a requirement of the Minister under section 41(7) ; and (b) at such rate as is, at the time the coal is won, prescribed for the purposes of this paragraph or, if a different rate is fixed pursuant to subsection (2), (3), (4), (5), (8) or (9), at that different rate. (2) The Governor may fix the rate of royalty to be paid on coal won from land subject to a coal lease during any period when the lease has effect under section 56. (3) The Governor may fix the rate of royalty to be paid on coal won from a mining area during any period for which the coal lease concerned is renewed under this Act. (4) If a coal lease is to be granted wholly or partly over land which was, at a date not earlier than five years before the date on which the application or tender for the grant of that lease was lodged, the subject of a coal lease held by the same person or persons, or persons who are, in the opinion of the Minister, substantially the same persons, as the person or persons to whom the coal lease is to be granted, the Governor may, by instrument in writing, fix the rate of royalty to be paid on coal won under the mining lease to be granted.

128(1) The Minister shall cause to be paid to an account within the Special Deposits Account at the Treasury- (a) moneys received in connection with tenders for the grant of a coal lease in response to an invitation to tender under section 32 (including any cash reserve price but not including royalties) whether paid by instalments or otherwise; (b) moneys paid in consideration of the grant of a coal lease pursuant to an application lodged under section 35 (not being royalties) ; and (c) moneys paid as interest pursuant to an agreement referred to in section 127. (2) From the moneys referred to in subsection (1) that have been paid to the account so referred to, the Minister shall, with the concurrence of the Treasurer, cause to be paid- (a) to unsuccessful tenderers for the grant of a coal lease in response to an invitation to tender under section 32, the fees and deposits refundable to them under section 33 (8); and (b) to the Consolidated Revenue Fund, fees paid by tenderers for the grant of a coal lease in response to an invitation to tender under section 32 that are not refundable under section 33(8); (c) * * * * * (3) Moneys referred to in subsection (1) that are not payable under subsection (2) shall, if those moneys have-been paid to an account under subsection (1) in respect of a coal lease that relates to land in which the coal (if any)- (a) in the case of any part of those moneys that has been deposited under section 33(2)(d) - was, at the time the lease was granted; or (b) in the case of any other part of those moneys - was, at the time at which it became payable, exclusively owned by, or reserved to, one person, be paid- (c) if that person is the Crown - to the Consolidated Revenue Fund; and (d) if that person is not the Crown - to that person. (4) Moneys referred to in subsection (1) that are not payable under subsection (2) shall, if those moneys have been paid to an account under subsection (1) in respect of a coal lease that relates to land in which the coal (if any)- (a) in the case of any part of those moneys that has been deposited under section 33(2)(d) was, at the time the lease was granted; or (b) in the case of any other part of those moneys - was, at the time at which it became payable, exclusively owned by, or reserved to, two or more persons, be apportioned among those persons in the proportions in which the Minister estimates that the coal (if any) was, or, if any coal has been extracted, would, but for the extraction of that coal, have been, owned by, or reserved to, those persons at the time referred to in paragraph (a) or (b), whichever is applicable, and the amounts so apportioned shall be paid- (c) in the case of an amount apportioned to the Crown - to the Consolidated Revenue Fund; and (d) in any other case - to the person or persons to whom the amount or amounts is or are apportioned, as the case may require. 45 Had the lease to Bloomfield been entered into when Nardell still owned the coal, seven-eighths of the royalty, including the super-royalty, would have been payable to Nardell under s.76(2), and a proportion of the front-end payment would have been payable to Nardell under s.128(4). 46 The CAA 1981, as originally passed, contained the following provisions in ss.5 and 6: Vesting of coal in the Crown. 5. All coal that, but for this Act, would be vested in (a) an instrumentality or agency of the Crown; or (b) any person other than the Crown, is vested in the Crown freed and discharged from all trusts, leases, licences, obligations, estates, interests and contracts. Arrangements by the Governor. 6. (1) The Governor may make arrangements- (a) for the determination of the cases, if any, in which compensation is to be payable as a result of the enactment of this Act; and (b) if there are any such cases-for the determination of the amount and method of payment of any such compensation. (2) Except in the cases, if any, and to the extent, determined under subsection (1), compensation is not payable as a result of the enactment of this Act. 47 The Coal Mining (Amendment) Act 1981, passed consequentially on the CAA 1981, amended s.76(2) of the CMA by omitting reference to coal in that sub-section; and it amended s.128 of the CMA by omitting all matter after sub-section (2) of that section, and inserting the following sub-section (3): (3) Moneys referred to in subsection (1) that are not repayable under subsection (2) shall be paid to the Consolidated Revenue Fund. 48 Nardell's original claim was made under the 1985 Arrangements. Clause 9 of those Arrangements was as follows: 9 Persons eligible to make claims for compensation (1) Any person, other than the Crown or an instrumentality or agency of the Crown, is eligible to make a claim under clause 10 or 11 if: (a) saleable coal was, immediately before the base date, vested in that person, and (b) that coal was situated within a colliery holding at any time during the period beginning with the base date and ending with 1 January 1986. (2) Where a person claims to have sustained pecuniary loss which is directly attributable to the discharge of any trust, lease, licence, obligation, estate, interest or contract by virtue of the operation of section 5 of the Coal Acquisition Act 1981, and the loss is not one in respect of which a claim could be made under clause 10 or 11, the person is eligible to make a claim under clause 12. 49 The "base date" referred to in that clause is 1 January 1982. Nardell's coal was not within a colliery holding at that time, so Nardell's claim was brought under cl.9(2). 50 Clause 18 of the 1985 Arrangements made provision as to how the Board was the calculate compensation under clauses 10 or 11. In fact, this formula was also used by the Board in relation to certain claims under cl.12. Clause 18 provided a formula based on actual tonnages of coal extracted or to be extracted (represented by the letter t) and a notional royalty figure (represented by the letter r). In relation to claims under cl.10, r was specified at ninety cents. It is common ground that this figure of ninety cents was based on the following calculation: seven-eighths of the prescribed royalty rate of $1.70 per tonne, less tax at the then existing company rate. 51 After passage of the CORA 1990, the CMA 1973 was amended to re-insert reference to coal in s.76. However, no amendment was then made to s.128, which remained as it had been amended in 1981. 52 The Mining Act 1982 made the following provisions in relation to royalty: Division 1 Publicly owned minerals 282 Liability to pay royalty, (1) The holder of a mining lease is liable to pay royalty to the Minister on publicly owned minerals recovered under the lease. (2) Royalty that is payable to the Minister under a condition of a mining lease (being a condition of the kind referred to in section 70(4)) is payable in addition to, and not instead of, royalty payable under this Division.

283 Rate of royalty (1) Royalty on a publicly owned mineral is payable under this Division: (a) at the base rate prescribed by the regulations in respect of that mineral, and (b) if the regulations so provide - at the additional rate prescribed by the regulations in respect of that mineral. (2) Royalty under this Division is payable on a publicly owned mineral at the rate or rates applicable as at the time the material from which it is recovered is extracted from the land. (3) A rate of royalty prescribed for the purposes of this Division may be prescribed: (a) as a percentage of the value of minerals recovered from the land, or (b) as an amount payable on the basis of any specified measurement of minerals recovered from the land, or (c) by reference to such other matters as the Minister determines. (4) The quantity of minerals recovered is to be calculated (whether by volume or by weight) in the manner prescribed by the regulations. (5) The value of minerals recovered is to be calculated (whether by volume or by weight) in the manner determined by the Minister.

Division 2 Privately owned minerals 284 Liability to pay royalty (1) The holder of a mining lease is liable to pay royalty to the Minister on privately owned minerals recovered from the land as if those minerals were publicly owned minerals. (2) If royalty (including any interest on royalty) is paid to or recovered by the Minister in respect of a privately owned mineral, the Minister is to pay: (a) seven-eighths of the amount so paid or recovered to the owner of the mineral, and (b) one-eighth of the amount so paid or recovered to the Treasurer for payment into the Consolidated Fund.

285 Rate of royalty Royalty is payable under this Division: (a) except as provided by paragraph (b) - at the base rate prescribed under section 283(1)(a) in respect of the mineral concerned, or (b) in the case of a mineral other than coal - at such other rate as may be agreed on between the holder of the mineral claim or authority concerned and the owner of the mineral. 53 It will be seen that, in relation to private coal, s.285 had the effect that there could not be royalty in excess of the prescribed rate: that is, in relation to leases entered into in relation to this Act, there was to be no possibility of a super-royalty in relation to privately owned coal. 54 The CAAA 1997, as well as providing for the re-vesting in the Crown of certain coal which had been restored to its owner, added the following subsections to s.6 of the CAA 1981: (5) Arrangements under this section may also provide for: (a) the basis on which any recommendation referred to in section 5B (3) is to be made, and (b) the determination of the amount, and method of payment, of any consideration payable in respect of coal acquired under section 5B. (6) Arrangements under this section that, before the commencement of this subsection, were made otherwise than by order are taken always to have been made by order. (7) The amount of compensation payable under arrangements under this section must be just and equitable in so far as the compensation: (a) results from the operation of section 5A, or (b) relates to a refusal by the Minister to grant coal to an eligible applicant, after the commencement of this subsection, under the Coal Ownership (Restitution) Act 1990. For the purposes of giving effect to paragraph (b) any existing determination of the compensation concerned is to be re-determined in accordance with this subsection. (8) It is the duty of the Minister: (a) to ensure that the arrangements are reviewed as soon as practicable after the commencement of this subsection, and thereafter from time to time, for the purpose of ascertaining whether or not the arrangements comply with subsection (7), and (b) to ensure that amendments to the arrangements are promoted, from time to time as necessary, to bring the arrangements into conformity with subsection (7). 55 The 1997 Arrangements, made pursuant to ss.(7) and (8) of s.6 of the CAA 1981, introduced by the CAAA 1987, contained the following provision: 10 Compensation under 1985 Arrangements to be redetermined if restitution application refused on Crown revenue grounds (1) When an eligible claimant under the Restitution Act has the person's application under that Act refused on the ground specified in section 7 (1 A) (b) of that Act (namely, that the Minister is of the opinion that the Crown would lose significant revenue were the coal concerned to cease to be vested in the Crown), the original compensation claim (that is, the claim for compensation under the 1985 Arrangements by reason of which the person was such an eligible claimant) is on application to be redetermined under this Order. (2) For the purposes of the redetermination, the compensation payable is to be calculated in accordance with Schedule 1. The amount of compensation as redetermined is not to be less than the amount determined under the 1985 Arrangements in respect of the original compensation claim. (3) Any determination under the 1985 Arrangements in respect of that original compensation claim is discharged and is of no effect for the purposes of the 1985 Arrangements (including any appeal under the 1985 Arrangements). Compensation in respect of coal to which the original compensation claim relates ceases to be payable in accordance with the 1985 arrangements and is payable in accordance with this Order (and not otherwise). This subclause does not affect the validity of any interim payment of compensation under the 1985 Arrangements. (4) Pending a redetermination of compensation under this clause, the person whose claim under the 1985 Arrangements is to be redetermined is entitled to a preliminary payment of compensation under this Order equal to the amount of the compensation as determined under the 1985 Arrangements (less any interim payments of that compensation made under the 1985 Arrangements). 56 Schedule 1, referred to in cl.10, was as follows: 1 Definitions In this Schedule: base date means: (a) in relation to a clause 6 application, the date on which the coal to which the application relates vested in the Crown under section 5A of the Acquisition Act, or (b) in relation to a clause 10 application, 1 January 1982. clause 6 application means an application under clause 6. clause 10 application means an application under clause 10. median date , in relation to a relevant period, means 1 January in that relevant period. relevant period means a period of 12 months that begins on 1 July in a year.

2 Calculation of compensation (1) The Board is to determine an application by calculating the amount of compensation payable on the application in accordance with the following steps: Step I (Calculation of total base compensation amount by calculating and totalling amounts of compensation for each relevant period) Calculate an amount of compensation in respect of each successive relevant period, beginning with the relevant period within which the base date falls and ending with the relevant period that, in the Board's opinion, is the last relevant period in which saleable coal will be extracted from the land to which the application relates. The calculation of compensation for each relevant period is to be in accordance with whichever of the following formulas is appropriate for the relevant period concerned: (A) Relevant periods occurring before the date on which the Board determines the application: rxtxa (B) Relevant periods occurring after the date on which the Board determines the application: r x t x _e 1000 (C) The relevant period during which the Board determines the application: The formula to be used is the formula in (B) if the determination is made before 1 January in the relevant period or the formula in (A) if the determination is made on or after 1 January in the relevant period.

Then add together each of the amounts calculated under this step in respect of the application to obtain a total base compensation amount for the application. Make any adjustment to the total base compensation amount that may be necessary to ensure that the amount of compensation is just and equitable and to give effect to any reduction under clause 8 or 11 (Gains to be offset against compensation).

Step 2 (Allowing for any interim and preliminary payments already made on the application after adjusting those payments according to when they were made)

Subtract from the total base compensation amount determined under step 1 an amount calculated as follows (being the total of adjusted interim and preliminary payments): Adjust any interim and preliminary payments made in respect of the application by multiplying each such payment by the relevant incremental factor and then adding together each of those adjusted payments. The relevant incremental factor for an interim or preliminary payment is a number equivalent to the amount of money that would be accumulated on and from the date on which the interim or preliminary payment is made up to and including the day before the date on which the Board determines the application if $1 were invested on the terms determined by the Treasurer under clause 3 of this Schedule.

(2) If the total of adjusted interim and preliminary payments calculated under step 2 exceeds the total base compensation amount determined under step 1, the excess is to be treated as an overpayment that the Board can recover from the applicant in accordance with this Order. However, only interim payments of compensation are recoverable under this subclause and the Board cannot under this subclause recover a preliminary payment of compensation except to the extent (if any) that the excess is due to any reduction in compensation under clause 8 (Gains to be offset against compensation).

(3) In the formulas in this clause: a in respect of a particular relevant period is a number equivalent to the amount of money that would be accumulated on and from the median date of the relevant period up to and including the day before the date on which the Board determines the application if $1 were invested on the terms determined by the Treasurer under clause 3 or on such other terms as the Board considers just and equitable in the circumstances of the case.

e in respect of a particular relevant period is the amount that, if invested at the date on which the Board determines the application on terms (including terms as to a rate of interest) determined by the Board in relation to the particular case, would produce the sum of $1,000 at the median date of that relevant period, or such other amount as the Board considers just and equitable in the circumstances of the case.

r is $0.90 or such other amount as the Board considers just and equitable in the circumstances of the case.

t in respect of a particular relevant period is: (a) for the purposes of a clause 6 application - the number of tonnes of saleable coal that in the Board's opinion has been or will be extracted from the land to which the application relates during that relevant period, but (in the case of the relevant period within which the base date falls) ignoring coal extracted before the base date, or

(b) for the purposes of a clause 10 application - the number of tonnes of saleable coal that in the Board's opinion has been or will be extracted from the land to which the application relates during the relevant period.

SUPER-ROYALTY AND UP-FRONT PAYMENT Submissions 57 Mr. Perram for the Board submitted that the 1997 Arrangements required that one take account of actual events at the time of determination in order to determine what is required for the amount of compensation to be "just and equitable" as required by s.6(7) of the CAA as amended in 1997. Although payment of the super-royalty and the up-front payment were actual events, so too were statutory amendments that had the effect that private owners of coal could not obtain either a super-royalty (see s.285 of the MA 1992) or an up-front payment (the repeal of s.128(3) and (4) in 1981, and the failure to reinstate them after the passage of the CORA 1990). Since Nardell could not have obtained either any super-royalty or up-front payment, it was not just and equitable that it be compensated for the loss of such payments. 58 Mr. Perram also submitted that, in determining what is just and equitable, it should be taken into account that the existence of a claim for compensation under the 1997 arrangements was consequent on a failed restoration application; and that if that application had succeeded, Nardell could not have obtained either a super-royalty or an up-front payment. Similarly, if the coal had been restored to Nardell, and if compensation was being awarded for a new acquisition of the coal by the Crown, there would be no possibility of compensation in respect of the super-royalty or up-front payment. Mr. Perram pointed out that what is just and equitable may not be the same as full compensation: see Nelungaloo Pty. Limited v. The Commonwealth (1948) 75 CLR 495. 59 As a fall-back position, Mr. Perram submitted that, even if one considered that Nardell could have had the super-royalty payment until 1992, the effect of the MA 1992 was that there could be no super-royalty payable in respect of leases of private coal, even pre-existing leases; so the super-royalty would have to cut out in 1992. 60 As regards any argument based on NSW Coal Compensation Board v. NSW Coal Compensation Tribunal NSWCA 26/7/97 (Gilder's case), to the effect the 1992 Act was consequential on the 1991 CAA, Mr. Perram submitted that "but for" causation was not sufficient. The Court should not speculate as to the reasons for legislation eleven years later, and it could not be said that, as a matter of common sense, the 1992 MA was consequential on the 1981 CAA.

Decision 61 In my opinion, it is clear that the questions concerning super-royalty and up-front payment should be approached on the basis that Nardell is being compensated for the loss of its coal on 1 January 1982, not for the refusal of its application for restoration of the coal. This is made clear by the word "re-determined" in s.6(7) of the CAA as amended in 1997, by the specification in cl.10 of the 1997 Arrangements that what is being re-determined in the original compensation claim, and by the identification in Schedule 1 of the 1997 Arrangements of the base date as being 1 January 1982. However, in determining what is "just and equitable" it may be relevant that the re-determination is pursuant to arrangements that are "in relation to" the fact of refusal. 62 The calculation of compensation of a person for an event usually requires comparison of what actually happened to the person as a result of the event with what would have happened if the event had not occurred. In this case, what actually happened to Nardell was that (apart from compensation) it got no benefit from its coal. What would have happened if the event had not occurred would normally be determined on an approach in accordance with the decision in Malec v. J.C. Hutton Pty. Limited (1990) 169 CLR 638: that is, not by considering what would have happened on the balance of probabilities, but by assessing the degrees of probabilities of various possible outcomes. However, where what is being compensated is the loss of an asset to another person or entity that exploits the asset, the return to that other person or entity will often be a very reliable guide to the return which would have been achieved by the person to be compensated. Even on a Malec approach, the chances of doing better or doing worse would often cancel out. On the other hand, if the return to the party who acquires the asset can be seen as having been caused by some wholly unexpected event (such as for example the opening up of a new port which makes a coal deposit profitable to work), a Malec approach would presumably require a discount to be applied to the actual return. 63 The Arrangements (both 1985 and 1997) make it clear that, at least in relation to the calculation of t, a Malec approach is not to be applied. It is the actual tonnage won that determines this element of compensation for the period up to the decision, and the best estimate at the time of the decision of what will be won in the future that determines this element of compensation for the future. The 1985 Arrangements also make it clear that r is not determined on a Malec approach, because it is specified at ninety cents. However, the 1997 Arrangements specified that r should be ninety cents or such other amount as the Board considers just and equitable; and these Arrangements are subject to a statutory requirement in s.6(7) of the CAA as amended in 1997 that the compensation must be just and equitable. So the question is, how should the determination of r be approached, under the 1997 Arrangements? 64 A Malec approach, if applied to r and not t, would presumably require one to take as certainty both the quantities actually won and the circumstances existing at the time of decision relevant to what would be won in the future; and to ask what, if any, figure for super-royalty would best reflect the probabilities as at 1 January 1982 for obtaining a super-royalty and the amount of such royalty. A reasonable approach would be to take the fifty cents actually achieved, and consider whether the probabilities for doing better or worse, as at 1 January 1982, would justify any adjustment. A likely result would be that these probabilities would cancel out, thus justifying fifty cents on a Malec basis. On this approach, there would seem to be no reason not to apply this super-royalty for the life of the deposit. 65 Sperling J considered that the rejection of the Malec approach for t meant that it should also be rejected for r; and that one should look at the actual royalty obtained. That approach would also give a super-royalty of fifty cents, unless one says that one must ask not merely what was obtained by the acquirer of the coal (the Crown) but also whether this could have been obtained by Nardell if it had remained owner. This question in turn could be approached either on a Malec basis (applied to the probabilities either at 1 January 1982 or at the time of the decision) or something to be decided on the balance of probabilities. It seems that Sperling J in effect decided it on the balance of probabilities: he said, if Nardell had remained the owner of the coal because the acquisition scheme was not undertaken, then probably the legislative preclusion of super-royalty for private coal (in s.285 of the MA 1992) would not have occurred. 66 This discussion suggests there may be work for the words "just and equitable" to do, over and above what is indicated by the word "compensation", because the scheme has so muddied the question as to how compensation is to be worked out that it is not a straight-forward matter of determining an actual value or loss. 67 Furthermore, as submitted by Mr. Perram, there may be circumstances where something less than full compensation can be seen as just and equitable. For example, in tort law, where it is sometimes fortuitous that a negligent and insured defendant can be found, and where full compensation in all cases where such a defendant can be found may be thought to have very bad effects (collapsing insurance companies, doctors unwilling to undertake obstetrics, etc.), it may possibly be seen as just and equitable in a broad sense that provision be made for some principled limit to compensation. 68 In this case, I do not think that any argument along these lines is made out by the Board. I do not see any merit in the argument that Nardell should get something less than full compensation, because full compensation would leave Nardell better off than if it had succeeded in its application to have coal restored to it, or better off than coal owners whose coal is re-acquired. To make good an argument that this was just and equitable, it would need to be shown that there are grounds for giving less than full compensation to everyone, as may be the case in the tort law example. No such grounds are suggested here. 69 In considering what is just and equitable, I would start with the prima facie position that a Malec approach, applied as at 1 January 1982, would come closest to giving proper compensation; and if departures from that approach are required, then it is just and equitable that these do not cause a result substantially different from a wholesale Malec approach. 70 In the present case, the departure from the Malec approach in the case of t probably makes little difference. There seems no reason to suppose that the chances of doing better or worse do not cancel out. So a result similar to a wholesale Malec approach would be achieved by taking a Malec approach to r, and including the fifty cents super-royalty as discussed above. 71 If the view is taken that the 1997 Arrangements disclosed an intention that compensation be based on actual events, then I see no reason to do other than have regard to the royalty that was actually paid to the Crown. It is fair to the Crown (it effectively keeps the benefit of one-eighth of the whole royalty) and also to Nardell (it accords with the result of a Malec approach). Thus I do not see any justification for adding at this point the further question, would that royalty have been paid to a private owner? I think considerations based on the concept of compensation, and on justice and equity, are against asking such a question, particularly if it would support a different result by giving an inequitable benefit to the Crown (keeping the whole of the super-royalty) at the expense of Nardell. 72 On the other hand, if one did ask that question, and if it were approached on a Malec basis, it would seem there would have to be at least some discount from the fifty cents to allow for the chance that the super-royalty would not have been payable to private owners. If the question were approached as one to be decided on the balance of probabilities, rather than on a Malec basis, as Sperling J did, then in my opinion Sperling J's decision in favour of Nardell is not shown to be wrong. The abolition for super-royalties for private coal can reasonably be regarded as a consequence of the 1981 expropriation of private coal, not merely in a "but for" sense but also on a common sense approach, such as was applied in Gilder's case. I do not think this conclusion is precluded by any notion of legislative inscrutability, as advocated by Mr. Perram. So again, on the basis of the concept of compensation and on the basis of what is just and equitable, I would, if this additional question were to be asked, approach it and decide it as Sperling J did. 73 Accordingly, in my opinion, the appeal on the super-royalty point should be dismissed. In my opinion, the same argument and conclusion applies in relation to the up-front payment.

DETERMINATION OF THE r FACTOR 74 Before outlining the submissions on this topic, it is necessary to say a little on how it arises. 75 Schedule 1 of the 1997 Arrangements provides for a calculation involving four elements, r, t, a and e. As noted above, r is an element representing the royalty per tonne that would have been obtained from the coal, and t is an element representing the number of tonnes of coal extracted or to be extracted. The element a represents interest on amounts in respect of past periods; and the element e (or e/1000) represents a discount applying to amounts in respect of future periods. 76 The Board determined r to be ninety cents. However, this did not take into account the circumstance that company tax rates had come down, so that the amount by which seven-eighths of $1.70 was to be reduced by reason of tax had to be less; and it was for that reason that the Tribunal decided that r should be re-calculated by the Board. The determination of Sperling J, with which I have agreed, would mean further that the starting point for the calculation of r should be $2.20 rather than $1.70, because of the inclusion of the super-royalty. 77 The contention of Nardell before Sperling J, and upheld by him, was that the Board should also take into account, in calculating r, that there should be a further adjustment upwards for the effect of dividend imputation credits on the effective tax burden. The basis of this contention was the way that the Tribunal had calculated the e factor, which in effect took account of the impact of dividend imputation credits, and thereby made this factor smaller than it would have been if the impact of those credits had not been taken into account. 78 I note that the e factor was calculated by the Board using a discount rate that took into account the risks of (and therefore the appropriate interest rate for) investing in coal ownership: the higher the risk, the higher the discount rate, and the lower the e factor and the compensation. The actual discount rate adopted by the Board was 15.5%. 79 It reached this figure by taking a base rate, and then increasing it because of its assessment of additional risks from the nature of the investment. Since there was no practice of investing in coal deposits on which to base this assessment, the Board took the coal mining industry as involving similar risks, and it also adjusted the discount rate because of what it saw as particular disadvantages of the coal deposit it question. On appeal to the Tribunal, the Tribunal explained the Board's methods as involving a base discount rate of 9.5%, comprising a long-term bond rate of 6.5% plus a coal industry premium of 3%: the Board then determined mine-specific factors as justifying a further 6.5%, but applied a capping rule to the effect that the mine-specific adjustments should not exceed 6%. Adding this 6% to the 9.5% gave the adopted rate of 15.5%. 80 The Tribunal decided that the addition to the 9.5% from mine-specific factors should be 3.5% rather than 6.5%. However, in doing so, the Tribunal accepted what it called the current method used by the Board for calculating the base discount rates, this being set out in a Minute Paper dated 15 August 2001 (Blue 4, 727-732). This used what is called a WACC formula, which in turned used an imputation tax adjustment of 0.5% (this in effect halving the effect of tax on the cost of debt). Using this formula, a figure of 8.25% was reached, from which was subtracted was said to be a long-term bond rate of 5.82% to give 3.23%; and this was rounded to the nearest 0.5% to reflect the uncertainty of the calculation, giving a coal industry premium of 3%. This was then added to a ten year bond rate of 6.63% to give 9.63%, which was then rounded off to the nearest 0.5% to give 9.5%, which was adopted as the base rate. 81 The problem with this was that the experts called by the parties agreed that, if the imputation tax adjustment was made in this way for the purpose of calculating e, this would give an incorrect result if such an adjustment was not made in calculating r. And neither the Board nor the Tribunal made that adjustment in calculating r. 82 Before the primary judge, Nardell and the Board agreed that, whereas dividend imputation should benefit investors, the effect of taking it into account in the way the Tribunal did in relation to e and not r was to increase the discount rate by 0.45%, with a corresponding decrease in the value of e and thus of the value of the deposit to an investor. It was also agreed that, if dividend imputation is not taken into account in relation to r, the method adopted by Nardell's expert provides for a benefit to investors by a calculation which reduces the discount rate by about 0.8% (applying the first of three WACC formulae set out in Table 4 on Blue 4, 657). I understand this to be an agreement that the approach adopted by the Tribunal was wrong, and that the method adopted by Nardell's expert was an appropriate method for dealing with dividend imputation. It appears that there was agreement that the resultant error in the discount rate was of the order of about 1.4% to about 1.8%. 83 The decision of the primary judge had the effect that the Tribunal was to re-determine its determination of the value of r in accordance with his decision, so as to make it consistent with its determination of e.

Submissions 84 Mr. Perram for the Board conceded that error was shown in the Tribunal's decision in an apparently inconsistent approach to the calculation of r and e, without justification by any reasons. However, he submitted that it was wrong to remit the matter to the Tribunal on the basis that only r was to be re-determined, particularly when it had not been Nardell's case before the Tribunal that r needed to be adjusted: the Court should leave it to the Tribunal whether it should adjust r or adjust e or adjust both of them, or perhaps even justify the apparent inconsistency by valid reasons. 85 Mr. Perram further submitted that there would be an error if the Tribunal merely adjusted r, because the relevant WACC formula only applied to part of the discount figure used to calculate e. 86 Mr. Robb QC for Nardell submitted that the summons only sought the quashing of the determination in relation to r; and that there was no application to quash the determination in relation to e. Next, he submitted that the order made by the primary judge was the most direct way to achieve the result, and he submitted that the experts agreed that, so long as consistency was achieved in the calculation of r and e, the resulting compensation would be the same. Further, he submitted, so far as possible the Court should determine the matter so as to leave minimum room for further error, especially error which Nardell may not be able to have corrected, because of the limited opportunity given by the legislation for challenges to be made to what the Board and the Tribunal do. 87 Mr. Robb submitted that the Board should not be permitted to rely on the second argument, namely that the formula applied only to part of the discount figure, because that point had not been raised below, or before the Tribunal, and could have been the subject of further evidence. In any event, he submitted, the point was not correct, because, properly understood, the relevant formula applied to the whole of the discount figure. 88 As a fall-back position, the following was put on behalf of Nardell: 39. If contrary to Nardell's submissions, the Court is inclined to quash and remit the Tribunal's directions relating to both e and r, Nardell submits that it would be unfair to Nardell to do so in a manner that enabled the Tribunal to determine afresh the whole of the debate about the determination of e . The Court should only quash and remit so much of the decision of the Tribunal that relates to the inconsistency issue. 40. If the determination of e is to be remitted, Nardell submits that the Court should conclude or direct that: (a) in re-determining the direction relating to e , one of the three Officer WACC formulae at Blue 4 page 657 should be applied to determine the base rate; (b) in re-determining the direction relating to r , the cashflow formula at Blue 4 page 657 that matches the WACC formula used to re-determine e should be applied; (c) in re-determining the directions relating to e, (i) the values to be ascribed to the integers in the WACC formula should be those set out in the CCB Minute Paper CCB786C Exhibit 6 (Blue 4/727-732); and (ii) the percentage reduction to the compensation payable to Nardell which flows from the penalty adjustment to the discount rate determined by the Tribunal (compared to the compensation which would have been payable in the absence of that adjustment) should remain unchanged irrespective of the choice made by the Tribunal in the selection of matching formulae for the purpose of determining r and e . (d) in re-determining the direction relating to r , the value to be ascribed to integer Xo in the cashflow formula should be 7/8ths of $2.20 (being the prescribed royalty plus the super royalty). (e) an adjustment should be made to the total base compensation to allow for 100% of Nardell's share of the front end payment of $121,788 paid under the Bloomfield lease of 20 October 1989.

Decision 89 I do not think the Board should be permitted to rely on Mr. Perram's second submission. It does not appear to have been raised previously, and I think it is a possible view that the relevant WACC formula did affect the calculation of the whole 13% discount. Clearly, in my opinion, it applied to the calculation of the figure of 8.25%, which was effectively adjusted to give the base rate of 9.5% by reason of a difference between a long-term rate of 5.02% and a ten year bond rate of 6.63%. It is not clear to me why that adjustment was made, but in any event there appears to be only 1.25% of the 9.5% which may be unaffected by the WACC formula. The total of 13% was reached by adding to the 9.5% mine-specific factors of 3.5%. It is not clear to me that this 3.5% may not bear some proportionality to the 9.5%, and in that way be at least indirectly affected by the WACC formula. The matter could have been affected by further evidence before the Tribunal, and the principle in Suttor v. Gundowda Pty. Ltd. (1950) 81 CLR 418 applies. 90 However, I would note that the WACC formula appears to have no application at all in relation to tonnages won up to the time of the determination; so presumably the re-calculation of r would only apply in respect of tonnages estimated for the future, which are affected by the calculation of e. 91 I do not think there any force in Mr. Robb's first submission. In my opinion, the circumstance that the summons only challenges the calculation of r, and that there is no application before the Court which explicitly challenges the calculation of e, does not mean that the Court is limited to quashing the determination of r. If the Court finds there is error in relation to the determination of r, in my opinion it is open to the Court to quash any part of the decision affected by that error. 92 There is some force in Mr. Robb's submission that the Court should determine the matter so as to leave minimum room for further error; but in my opinion for the Court in effect to require the Tribunal to maintain its decision in relation to e and re-calculate r so as to achieve consistency with that determination would go beyond the role of the Court in judicial review of an administrative decision, which is in substance to declare and enforce the law which determines the limits and governs the exercise of the administrative power in question; and even in doing so, the Court should leave to the deciding authority the full range of choices which the legislature is presumed to have intended: see Attorney-General (NSW) v. Quinn (1990) 170 CLR 1 at 35-37. Furthermore, I note that, in the calculation of the discount rate, in at least two places the Board rounded off figures in a way favourable to Nardell (0.23% in one case, 0.13% in another), and it seems to me that Nardell is not necessarily entitled to the benefit of that rounding-off in any re-calculation. 93 Although my reasons do not depend on this, particularly as it has not been the subject of submissions, I note that in written submissions Nardell has contended that adding 3.5% to a discount rate of 9.5% results in an 18% reduction in compensation. I note that applying dividend imputation to r appears to give a 28% increase in compensation (if the tax rate is taken as 36%) or a 21% increase (if the tax rate is taken as 30%). I am not sure that decreases in the discount rate of the order of 1.4% to 1.8% referred to in the submissions, would balance that kind of increase. 94 In my opinion, the Tribunal's decision should be quashed as regards the determination of both r and e. It is appropriate then to consider Nardell's fall-back position. 95 As regards pars.(d) and (e), these appear to follow in any event from the dismissal of the appellant's challenge in relation to the first main issue in the appeal. As regards pars.(a) and (b), these appear to be common ground. 96 Turning to par.(c), I do not believe it would be appropriate to make a direction in accordance with par.(i). Some of the integers, such as the tax rate and weighting factors, appear to be tied to particular dates that may not necessarily be appropriate for the re-calculation. It may be appropriate to direct that there be a selection of values to be ascribed to the integers which is generally consistent with the approach in the relevant Minute Paper. That is a matter that could be dealt with in draft orders to be brought in by the parties, and if there is any disagreement as to the details of those draft orders, they could be the subject of further submissions. 97 Turning to par.(ii) of par.(c), I take it that this is intended as a requirement that the penalty adjustment should bear the same proportion to the new base rate as 3.5% bears to 9.5%; so that if the new base rate is (say) 7.5%, the penalty adjustment becomes 2.76%. It seems to me reasonable that there should be some proportionality of this kind, but I do not think this Court is in a position to rule that the same proportion should be maintained, and I do not think that direction should be given.

CONCLUSION 98 For those reasons, in my opinion the appeal should be in substance dismissed on the first issue and allowed on the second issue. I think it is appropriate that specific directions be given, and I would direct the parties within 7 days either to bring in agreed orders that reflect these reasons, or alternatively bring in alternative versions with supporting written submissions within the same time. 99 As regards costs, the two issues took approximately equal time, and the appeal would have concluded in one day if the Board had appealed only on the second issue. The issues were entirely distinct and severable. In those circumstances, my tentative view is that Nardell should pay the Board's costs of instituting the appeal and preparing the appeal books, but that otherwise each party should bear its own costs of the appeal. ******

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